Genting Berhad Hit With Lower Credit Rating as S&P Forecasts Slow Business, Rising Leverage
Posted on: June 1, 2020, 08:49h.
Last updated on: June 1, 2020, 11:23h.
Standard & Poor’s (S&P) has trimmed its credit rating on Asian gaming giant Genting Berhad, saying business will remain slow in some of the operator’s crucial markets following the coronavirus pandemic. The service also said that corporate leverage could increase as a result.
The research firm lowered its rating on the Malaysian conglomerate to “BBB” from “BBB+”, while taking its grade on the Resorts World Las Vegas unit to “BBB-” from “BBB.” The $4.3 billion Strip venue, located across from Encore, is slated to open in summer 2021. Genting also owns and operates casinos in the Bahamas, Malaysia, the Philippines, Singapore, and the US.
The COVID-19 pandemic is hitting the Genting group harder and longer than we anticipated,” said S&P in a research report. “Several gloomy events have occurred since we revised the rating outlook on Genting to negative on March 11, 2020. These will translate into a weaker performance in 2020 and a longer recovery path than we expected.”
Several workers at the Resorts World Las Vegas site were diagnosed with the coronavirus, but construction on the venue is continuing.
Genting operates Resorts World Sentosa, one of two integrated resorts in Singapore. That’s one of the company’s marquee properties, and was the first of the two casinos there to close during the pandemic. Both were ordered to close by the government on April 7 and have been shuttered since then, as the city-state became one of Asia’s coronavirus hot spots with nearly 35,000 cases of the respiratory illness and 23 deaths.
On May 19, policymakers there announced a three-phase reopening plan, phase one of which starts tomorrow. Phase two is expected to commence four to six weeks after the completion of the first phase. Restaurants are included in phase two, but Singaporean officials say venues that are deemed higher risk, including casinos and movie theaters, will require more reopening discussion.
Currently, Genting and Las Vegas Sands, the operator of Marina Bay Sands, have limited visibility on when the two Singaporean integrated resorts will reopen. But the city-state is in talks with Malaysia and some other nearby countries about loosening travel restrictions.
Las Vegas Concerns
Nevada casinos are scheduled to reopen on June 4, but not all Strip venues are coming back online on that date. Since the outbreak of COVID-19, analysts consistently said regional markets will bounce back faster than Las Vegas, and that Sin City could endure some seismic changes in travel and leisure tastes.
“We foresee structural changes that could alter the attractiveness of Las Vegas as a gaming destination in the next 24 months,” said S&P. “Travel fears, restrictions, reduced airline capacity, and shrinking consumer pockets can put pressure on half of Las Vegas’ visitors who fly in by air. Businesses could also rethink on conventions, or prefer smaller group meetings or smaller budgets, affecting midweek demand.”
Assuming those fears don’t soon abate, Resorts World Las Vegas could contend with a tepid opening when it debuts next year.